The American defence contractor L3 Harris has abandoned talks to acquire NSO Group’s surveillance technology after the White House said any potential deal raised “serious counterintelligence and security concerns for the US government”.

The White House opposition, which was first reported by the Guardian and its media partners last month, was seen as an insurmountable obstacle to any transaction, according to a person familiar with the talks who said the potential acquisition was now “certainly” off the table.

The news, which is being reported by the Guardian, Washington Post and Haaretz, follows a tumultuous period for the Israeli surveillance company, which was placed on a US blacklist by president Joe Biden’s administration last November after the commerce department’s bureau of industry and security determined that the firm had acted “contrary to the foreign policy and national security interests of the US”.

A person familiar with the talks said L3 Harris had vetted any potential deal for NSO’s technology with its customers in the US government and had received some signals of support from the American intelligence community.

A US official appeared to question that characterisation and said: “We are unaware of any indications of support or involvement from anyone in a decision-making, policymaking or senior role.” The US official also said the intelligence community had “raised concerns and was not supportive of the deal”.

Sources said L3 Harris had been caught off guard when a senior White House official expressed strong reservations about any potential deal after news of the talks was first reported. At that time – last month – a senior White House official suggested that any possible deal could be seen as an effort by a foreign government to circumvent US export control measures. The senior White House official also said that a transaction with a blacklisted company involving any American company – particularly a cleared defence contractor – “would spur intensive review to examine whether the transaction poses a counterintelligence threat to the US government and its systems and information”.

Once L3 Harris understood the level of “definitive pushback”, a person familiar with the talks said, “there was a view [in L3 Harris] that there was no way L3 was moving forward with this”.

“If the [US] government is not aligned, there is no way for L3 to be aligned,” the person said.

There were other complications. The Israeli ministry of defence would have had to sign off on any takeover of NSO surveillance technology by a US company and it is far from clear whether officials were willing to bless any deal that took control of NSO’s licences away from Israel.

Last month, one person familiar with the talks said that if a deal were struck, it would probably involve selling NSO’s capabilities to a drastically curtailed customer base that would include the US government, the UK, Australia, New Zealand and Canada – which comprise the “five eyes” intelligence alliance – as well as some Nato allies.

But the person also said that the deal faced several unresolved issues, including whether the technology would be housed in Israel or the US and whether Israel would be allowed to continue to use the technology as a customer.

Source: The Guardian

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